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Recently, the Supreme Court of New South Wales handed down the first major Australian decision regarding the Personal Property Securities Act 2009 (PPSA). This decision highlights the dramatic way in which the PPSA has affected ownership under Australian law, and serves as a warning to contractors who have left security interests unperfected.

In this case an equipment hire company obtained finance to purchase several items of caterpillar excavators and loaders (the equipment). The company then leased the equipment to a contractor for use in civil construction work in the Northern Territory, before the Personal Property Securities Register (PPSR) commenced. Neither the company nor its financiers registered their security interests in the equipment on the Northern Territory motor vehicle register prior to the PPSR commencement date, or with the PPSR following the commencement date.

The hire company entered into a facility agreement with a new financier and gave that financier a general security agreement over its assets. As the financier had a security interest over the hire company’s assets, which was subsequently registered and perfected with the PPSR. The hire company went into administration and then liquidation, with the financier appointing managers and receivers to the hire company’s assets.

The policy of the PPSA is that competing security interests must be resolved according to the principles of priority. Under the PPSA, a perfected security interest has priority over an unperfected security interest.

Here, though the hire company did not have the protection afforded to a transitional security until 31 January 2014, as it did not register the equipment with the Northern Territory Register prior to the commencement of the PPSR, or with the PPSR following its commencement. This meant that the financier’s perfected security interest in the equipment had priority – despite the hire company paying for and having title to the equipment.

The financier was therefore entitled to keep the equipment as its own property.

What does this mean for Contractors?

This decision highlights the need to ensure all security interests are registered to protect title to property. The decision also highlights the vulnerable position many contractors may find themselves in, should they allow another party to possess their property and fail to register their interests on the PPSR.

If you did not bother to register an interest in a state-based register, waiting instead for the PPSR to commence you need to register on the PPSR without delay. If you do not it could result in you losing your property.

As a footnote the financier was entitled to demand payment under a personal guarantee and mortgage provided by one of the directors of the hire company, to satisfy the debts owing to them. If the hire company had registered its security interest with the Northern Territory Register, or the PPSR once it commenced, the director would not have been personally liable for the money it lost in the subsequent ownership battle.

For more information, please contact:


Scott Lambert | Partner
T +61 7 3135 0681

The information in this publication is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavour to provide accurate and timely information, we do not guarantee that the information in this pubilcation is accurate at the date it is received or that it will continue to be accurate in the future. We are not responsible for the information of any source to which a link is provided or reference is made and exclude all liability in connection with use of these sources.

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